Apple promised the iPod would put 1,000 songs in users’ pockets, turning the iTunes Music Store into an overnight success.

But it’s not that simple for the next generation of digital music distributors, who are promising to put every song ever in a users’ pocket, and it might take years to see whether their services will be anywhere near as lucrative.

But the stars have been aligning in recent years for music streaming services like Rdio and Pandora to hit the mainstream, thanks to the ubiquitous smartphone, increased bandwidth for data and more catalogues of music available for licensing.

And Canada is looking like a bright spot for the industry.

Just this week, there was a major step in this musical evolution: Google Inc. announced it was buying music streaming startup Songza Media Inc. to bolster its existing digital music strategy.

These acquisitions pit the technology giants against each other in an arms race for the music streaming space that has largely been dominated by startups including Rdio, Pandora and Spotify.

“There has been this explosion in the potential for streaming, and a lot of companies are angling to see what they can have as a role in that,” said Rdio chief executive Anthony Bay in an interview.

Just last month, e-commerce giant Amazon Inc. launched a music streaming service as part of its Prime subscription service.

Recent trends in music consumption show that these companies are on the right track.

During the first six months of the year, while U.S. album and digital track sales were slipping, compared to a year earlier, on-demand streaming rose 42%, according to a Nielsen report released Thursday.

The future for music streaming looks bright, said Mr. Bay. Rdio does not disclose its user numbers or growth, but Songza has more than five million and Pandora has more than 75 million.

Related

But it remains to be seen whether the industry will be dominated by the tech giants of the world or be more akin to the movie streaming business, where upstart Netflix has matured into a dominant player with a nearly US$30-billion market capitalization.

“It is our belief that there is room for large companies, where music is a feature of their business, and fiercely independent streaming companies,” said Mr. Bay.

Whoever wins, it’s unclear whether any will have profits to show for it.

Andrew Sheehy, chief analyst at Generator Research in London, said none of the current music subscription services can be profitable, even if they execute their strategy perfectly.

The licensing fees for content, accounting for as much as 60% of streaming companies’ expenses, make it incredibly difficult to turn a profit, Mr. Sheehy said.

“The costs they’re paying to the music industry are dragging [Pandora] right down… I don’t see the marketplace being able to support many music services with very similar offerings,” he said.

The sound recording licensing in Canada is definitely at a level that we think we can build a nice business in Canada on

Pandora Media Inc. has fluctuated between quarterly profit and loss. It reported adjusted profit of US$9-million in Q4 2013, but saw a US$28.9-million adjusted loss in Q1 2014. Analysts, however, are expecting Pandora to be profitable in the coming two quarters.

Meanwhile, as Canada is seeing an uptick in demand for music streaming, companies are staking their grounds.

Nearly two-thirds of the English-speaking Canadians recently polled by the Media Technology Monitor said they regularly streamed music online last year, including on YouTube and online radio streams, according to the Canadian Press. That’s up from 61% in 2012, and 57% in 2011, the report said. One in five said they used music streaming services such as Rdio and Songza, it added.

In April, Rdio announced a strategic marketing, content and promotion partnership with Calgary-based Shaw Communications Inc., which included an undisclosed investment in Rdio’s holding company Pulser Media.

Mr. Bay said Rdio, which entered the Canadian market in 2010, has recently hired a new general manager in Canada and Canadians should expect big things in the pipeline.

“Canada is not an afterthought for us,” said Mr. Bay, adding it is Rdio’s second largest market.

In May, Google announced it was launching its all-access subscription streaming service Google Play Music in Canada.

And last month, a Pandora executive told an investors conference that it is a “big step closer to being in Canada” after a Copyright Board of Canada ruling on royalty rates in May.

Unlike Songza and Rdio, which negotiated royalty rates directly with the record labels, Pandora had been holding off on entering Canada until the decision.

In May, the board set the rate at 10.2 cents per 1,000 plays for commercial webcasters, far below the rate of between $1 and $2.30 the music industry had pushed for.

The board’s rate applied to the period between 2009 and 2012, but gave some clarity on royalties going forward.

And the result may be already be playing well for the Canadian market, according to Pandora’s chief financial officer Mike Herring, who told the investors conference: “The sound recording licensing in Canada is definitely at a level that we think we can build a nice business in Canada on.”

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.